OPRACIV_ OFFICE PRACTICE IV

PROFESSIONAL PRATICE

B.TECH. ARCHITECTURAL TECHNOLOGY

Lecture 07
CONTRACTS
Name: Lawrence Ogunsanya
Email : ogunsanya@ukzn.ac.za
lawrencesanya@yahoo.com
 What is a contract
• A legally binding agreement. In other words… “A
promise or set of promises which the law will
enforce”.
• The agreement will create rights and obligations
that may be enforced in the courts.
• When the two parties agree to a contract, it
creates a legally recognized duty to perform
• Not all agreements are recognized as legally
binding

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 Elements of a Contract
• Valid contracts possess the following:
– An agreement between the parties: an offer and
acceptance
– Consideration--each party must do something that
they were not previously obligated to do
– Both parties have capacity to contract
– Formation and performance of the contract are
legal and not against public policy
– Writing and Registration

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 Offer and Acceptance
• The terms of the offer must be clear and definite
– Under the common law of contracts, at a
minimum the offer must contain Price, Quantity,
the Parties and the Subject Matter of the
contract.
– Must contain all material terms
• The offer must be communicated to the offeree
– and the offeree knows of the offer before
performing
– If an offer is made to the offeree, a third party
cannot accept the offer
– Offers can be directed to classes of offerees
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 Offer and Acceptance
• Just like an offer, the acceptance must have:
– Intent to be bound by the offeree
» Again judged by objective standard
» In general, silence is not deemed an acceptance
unless the parties had prior dealings
– Acceptance must be complete and unconditional
» An acceptance that contains conditions or
additional terms is a counteroffer and thus a
rejection of the offer
– Acceptance must be communicated to the offeror
» Offeree should use the same medium used by
the offeror to make the offer if nothing is said in
the offer.
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 Termination of the offer
– If the offeree rejects the offer or makes a
counteroffer, the offer is terminated
– Will occur when the offer is deemed lapsed after a
reasonable period of time
• What is reasonable depends upon the industry
– An offer could expire by operation of law
• Death or incapacity of offeror or offeree
• Supervening illegality
• Destruction of the subject matter

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 Remedies for Breach of Contracts
• Damages are monetary awards and can include:
• Compensatory Damages: These are damages for a
monetary amount that is intended to compensate the
non-breaching party for losses that result from the
breach.
• The aim is to "make the injured party whole again".
There are two types of compensatory damages: -
• Expectation Damages
• Consequential Damages

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 Remedies for Breach of Contracts
• Expectation Damages
• These are damages that are intended to cover what the
injured party expected to receive from the contract.
Calculations are usually straightforward as they are
based on the contract itself or market values
Consequential Damages
• These are intended to reimburse the injured party for
indirect damages other than contractual loss; for
example, loss of business profits due to an undelivered
machine

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 Termination of a contract
• Termination of contractual relations is called discharge
of contract. The following are different modes of
discharge or termination of contract.
• Discharge of contract by Performance
• If both parties perform and complete their contractual
obligations
• Discharge of contract by Breach
• Failure in performance of contractual obligation is called
breach of contract.
• Discharge of contract by Impossibility
• The element of impossibility terminate contractual
relations
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 Termination of a contract
• Discharge of contract by lapse of time
• After expiry of stipulated limitation period, the contract
gets discharged.
• Discharge of contract by Operation of law
• By Death, By Insolvency and By lunacy,
• Discharge of contract by Agreement
• Both parties come into a mutual agreement to end the
contract.

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 BUILDING
CONTRACTS

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 Building contract
• Currently available private sector contractual
systems/documents include:

• Joint Building Contracts Committee Series 2000 system

• Joint Building Contracts Committee 2000 Minor Works
form of contract
• New Engineering Contract system

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 JBCC Building contract
• JOINT BUILDING CONTRACTS COMMITTEE SYSTEMS.
• The JBCC Committee comprises representation by:
• Association of South African Quantity Surveyors
• Building Industries Federation South Africa
• South African Association of Consulting Engineers
• South African Institute of Architects
• South African Property Owners Association
• Specialist Engineering Contractors Committee
• Developed since 1991 and annually reviewed.
• It comprises a complete suite of documents that deal with all
relevant aspects of preparation for and administration of a
building contract.
• It is balanced and fair to all involved in the construction
process.
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 JBCC Building contract
• Importance of the JBCC
• JBCC documents are published and periodically updated
to promote standardisation and good practice in
building construction.
• The execution of and payment for the works
• It identifies the building procurement system;
• It explains the nature of the service;
• It distinguishes the roles and responsibilities of the
parties;
• It indicates obvious performance criteria; and,
• It reveals the mode of reimbursement.
• Stipulates contract: breaches, remedies, dispute
resolutions and termination.
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 JBCC Building contract
• JBCC Principal Building Agreement. (PBA)
• JBCC Minor Works Agreement. (MWA)
• Differences between the 2 documents
PBA MWA
Provision for a principal agent and One Agent only
other agents

Provision for nominated and Provisions for domestic or direct

selected subcontractors subcontractors only

Contractor liable for risk of third Employer liable for risk of third
party claims party claims

Contract may be based on bills of No provision for bills of quantities

quantities
Contractor to provide construction Provision of retention fund as
guarantee alternative to construction
guarantee
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 JBCC Building contract
• When to use Minor Works Agreement.
• The contract is for minor works of simple content
• A contractor is a small to medium enterprise
• The employer carries the major liabilities related to
the works
• The employer is responsible for the primary
insurances related to the works
• The construction period anticipated is to be less
than nine months.

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 Types Of Building Contractual
Arrangements
• Contract without Quantities.
• Contract without Quantities with a Schedule
of Rates
• Contracts with Bills of Quantities
• Provisional Quantities Contract
• Labour only
• Packaged Contract
• Turnkey Contract

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Questions